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Is WisdomTree U.S. MidCap Dividend ETF (DON) a Strong ETF Right Now?

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A smart beta exchange traded fund, the WisdomTree U.S. MidCap Dividend ETF (DON - Free Report) debuted on 06/16/2006, and offers broad exposure to the Style Box - Mid Cap Value category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Because the fund has amassed over $3.49 billion, this makes it one of the larger ETFs in the Style Box - Mid Cap Value. DON is managed by Wisdomtree. This particular fund, before fees and expenses, seeks to match the performance of the WisdomTree U.S. MidCap Dividend Index.

The WisdomTree U.S. MidCap Dividend Index is a fundamentally weighted index that measures the performance of the mid-capitalization segment of the US dividend-paying market.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for DON are 0.38%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 2.50%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

DON's heaviest allocation is in the Financials sector, which is about 24.40% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Chesapeake Energy Corp (CHK - Free Report) accounts for about 1.19% of total assets, followed by Packaging Corp Of America (PKG - Free Report) and International Paper Co (IP - Free Report) .

DON's top 10 holdings account for about 9.08% of its total assets under management.

Performance and Risk

The ETF has added roughly 8.08% so far this year and was up about 5.24% in the last one year (as of 02/01/2023). In the past 52-week period, it has traded between $37.67 and $45.36.

The fund has a beta of 1.05 and standard deviation of 29.76% for the trailing three-year period, which makes DON a medium risk choice in this particular space. With about 351 holdings, it effectively diversifies company-specific risk.


WisdomTree U.S. MidCap Dividend ETF is an excellent option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Russell Mid-Cap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard Mid-Cap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell Mid-Cap Value ETF has $13.61 billion in assets, Vanguard Mid-Cap Value ETF has $17.14 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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